Wealth Insights

I have climbed the highest mountains
I have run through the fields
Only to be with you
Only to be with you

A crew laying a sewer line across the Schepman family farm in Seymour, IN unearthed the remains of a mastodon that are probably over 10,000 years old. Although not a full skeleton, there were portions of the tusks, the skull and enough bones to allow an expert to estimate the size and age of the mastodon when it died. According to this article in The Tribune, the family that owns the discovery would like to donate it to the Indiana State Museum.

In case you missed it, a team of scientists released the first image of a Black Hole located at the center of Messier 87, a large elliptical galaxy over 53 million light years from earth. A team of over 200 scientists on six continents coordinated their efforts to form the Event Horizon Telescope, an earth-sized array of radio telescopes. Even though black holes are dense in a way that is nearly incomprehensible, they are not very big on a cosmic scale. This particular one has an event horizon of about one-half light day across (8 billion miles) and is 53 million light years away. So seeing it has been compared to trying to capture an image, from earth, of an orange resting on the surface of the moon. Multiple telescopes collected over 5 petabytes of data that was scrubbed to make up the resulting image. One petabyte of data is 1,000,000,000,000,000 bytes of data, or 1,000 terabytes. So much data that the Internet couldn’t handle it all. If this was a music file, it would take over 8,000 years to play. So the data was recorded on hard drives at each telescope and physically shipped to MIT for analysis. The combined shipping weight of all the hard drives was over a half ton.

This got us thinking about large amounts of data, and we have come to find out that 5 petabytes is not so much after all. Amazon.com, Inc., (AMZN) who reported earnings yesterday, has a division called Amazon Web Services, or AWS. AWS routinely transports up to 100 petabytes of data on Amazon Snowmobile mobile backup trailers. AWS drives the trailer to your site, plugs it in with a fiber optic cable to back up your data and then drives the truck to one of its backup sites and transfers the data to the cloud. The reason for the physical transfer is that it would take about 26 years to move an exabyte of data (1,000 petabytes) to the cloud using a standard Internet connection. AWS can move that amount of data in about 6 months with 10 Snowmobiles. Also fascinating is that AWS had an operating profit of $7.3 million in 2018 compared to an operating profit of $5.1 million for all of its global consumer sales. Basically this means there is more money to be made in data transfer, storage and retrieval than there is in selling stuff over the Internet.

May God bless and keep you always
May your wishes all come true
May you always do for others
And let others do for you
May you build a ladder to the stars
And climb on every rung
May you stay forever young

The graying of America?

Just an observation – President Trump was 70 years old at his inauguration and will be 74 in 2021 if re-elected. He is the oldest president ever elected. Notice from the accompanying chart going back to 1960, that every Democratic president except one (Johnson) has been younger than every Republican president. In fact, this pattern holds true all the way back to 1933 when Franklin Delano Roosevelt, a Democrat, was elected at age 51. The average age, at inauguration, of Democratic presidents is 48.6 compared to 61 for Republican presidents. If either Bernie Sanders or Joe Biden are elected, they will be 79 and 78 respectively at the time of the inauguration in January 2021. Other candidates, and their current age, in the Democratic primary are:

Joe Delaney - 56

Cory Booker - 49

Jay Inslee - 68

Andrew Yang - 44

Tulsi Gabbard - 37

John Hickenlooper - 67

Julián Castro - 44

Elizabeth Warren - 69

Beto O'Rourke - 46

Kamila Harris - 54

Amy Klobuchar - 58

Kirsten Gillibrand - 52

Wayne Messam - 44

Tim Ryan - 45

Eric Swalwell - 38

Mike Gravel - 88

Pete Buttigieg - 37

Seth Moulton - 40

First quarter Gross Domestic Product surprises to upside

Economic output in the United States surged to an annual rate of 3.2% despite the government shutdown early in the quarter.

Much of the strength in 1Q GDP came from a boost in net exports. When people in the U.S. buy goods or services from another country, that country’s GDP goes up. When we sell something to people in another country, U.S. GDP goes up. During the first quarter, our exports to other countries went up substantially while our imports fell from where they were in the fourth quarter of 2018.

Additionally, inventories rose, which means we get a boost this quarter, but not in future quarters when the inventory is sold.

Consumer spending slowed during the quarter, which should be a positive going forward as increased spending will help keep second quarter GDP at a healthy level.

Overall, the economy remains very healthy with full employment and low inflation. We think the Federal Reserve will hold rates steady this year as the risk of a recession remains very low.

Leading indicators point to continued economic expansion

The Conference Board Index of Leading Economic Indicators (LEI) rose for the second month in a row. Eight of the ten components that make up the index rose, or improved, during the month and two were unchanged.

Initial unemployment claims and consumer expectations for business conditions made the largest contributions to the top-line figure in March, increasing by 0.11% and 0.08%, respectively. Most components contributed positively to the index, with the exception of the average workweek for manufacturing workers and building permits, both of which held steady.

Housing data is mixed

Residential construction still lacks traction, as housing starts fell slightly in March. Starts fell 0.3% below the revised February total and are down by 14.2% from March 2018. Starts fell in three of the four census regions, with only the West having a substantial increase. Completions also fell, as did permits, indicating that there will be no upward jump in construction in the next two months.

After a strong February, existing-home sales fell in March, maintaining the slight downward trend over the past year. Sales fell 4.9% from February and are down by 5.4% from March 2018. The decline in sales took place in all four census regions, though the Midwest and West had larger falls. However, listings did increase, leading to a slight loosening in the market. Year-over-year median house price appreciation has slowed to 3.8% as of March.

Aided by a downward trend in house prices, new-home sales increased in March for the third straight month. Sales increased 4.5% from February and are up by 3% from March 2018. Despite this increase, the new-home market is still looser than it was a year earlier thanks to a continuing inflow of completions into the market. This inflow is also part of the reason why the median new single-family house price is down year over year.

Interested in receiving more investment and economic insights?

Sign up to receive weekly portfolio manager meeting notes, our quarterly economic outlook or occasional emails related to current financial news. You can select which emails you want to receive and unsubscribe at any time.

*Song Credits:
I Still Haven't Found What I'm Looking For - U2
Forever Young - Bob Dylan

Matt has over 25 years of experience in the trust and investment management industry. He is responsible for the company's economic outlook, asset allocation guidance and portfolio management team. In addition to his other responsibilities Matt serves on the Old National Wealth Management Executive Leadership Group, responsible for directing the activities of the organization at its highest level. Matt holds the Chartered Financial Analyst®designation and is a member of the CFA Institute®.

Investment instruments utilized by Old National Wealth Management are not FDIC insured, are not deposits or other obligations of Old National Wealth Management, Old National Bank, its parent company or affiliates, and involve investment risk including the possible loss of principal invested.

Investment and securities information presented herein is unique to Old National Wealth Management's approach to investment management. All information and opinions have been obtained from sources believed to be reliable and current at the time of publication, but are not guaranteed and do not claim to be a complete statement of all material factors. Examples or other representations made herein are for illustrative purposes and are not intended to be specific legal, tax, or investment advice and do not represent a solicitation.

Investments and strategies that may be presented may not be suitable for all investors. Old National Wealth Management Client Advisors and Portfolio Managers will work with interested parties to execute plans developed in consultation with their attorney or tax advisor.

The comments, views and opinions expressed herein are those of the author and Old National Wealth Management. From time-to-time, Old National Bancorp affiliates may issue reports or have opinions that are inconsistent with, and reach different conclusions from, this report. Old National Bancorp and its affiliates do not accept any liability for any direct, indirect or consequential damages or losses arising from any use of this report or its contents.